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  • FIRST POST
    • Captain Hook
    • By Captain Hook 3rd Jan 18, 8:09 PM
    • 7Posts
    • 5Thanks
    Captain Hook
    Late twenties and fairly clueless. What should we be doing?
    • #1
    • 3rd Jan 18, 8:09 PM
    Late twenties and fairly clueless. What should we be doing? 3rd Jan 18 at 8:09 PM
    To be quite honest, I haven't really considered retirement saving until this point as my wife and I have been prioritising saving for the wedding, raising a house deposit etc. No real Bank of Mum and Dad here. We are hoping to exchange and complete in the next several weeks and so my mind has started to move towards more long-term financial planning.

    Now, as a teacher, I have been contributing towards a defined benefit pension scheme since I started my first teaching job in 2012. The first two-and-a-half years were as part of a final salary (1/60, NPA 65) which has since become a career average scheme (1/57th of pensionable earnings each year, NPA 68). I currently pay 10.2% in each month. As it stands, my total pension amount represents 7.61% of the current Lifetime Allowance. I'm not sure whether that's something that I should be worried about. My wife is a doctor and has been paying into her NHS pension since she qualified in 2012. She doesn't have a clue as to the status of her scheme but believes that it's now based on her career average.

    I'm not entirely sure what our plans are going to be vis-a-vis retirement. We both have another 39 years before our normal pension ages. That's a long time away and I'm not convinced that I will want (or be able) to be working at a high level to that age. I suppose some flexibility would be preferable so that we/I could retire earlier if possible. I understand that your benefits reduce (fairly dramatically) if you retire 'early' and so what I suppose I'm after are tips, anecdotal stories and whatever else that anyone wants to contributes on what we should be doing.

    Should we be making additional voluntary contributions to our pension pots? Buying additional pension, faster accrual...? It's not unlikely that we will both hit the lifetime allowance at some point in our careers. Is this something we should be concerned about? Are Lifetime ISAs worth investigating? I understand that they mature/pay out at 60. Should we be looking at other forms of investment? Keep in mind that we are not particularly interested in finance and are relatively risk-averse.

    Some extra details. In the immediate term, we will be looking to complete our property purchase, 'do it up' to increase its worth, regularly overpay the mortgage, and build up an easy-access emergency fund (ca. 6 months income). We are both at points in our careers where we can take another step forward within the coming year - with the salary increases that will entail. House-wise, we expect to be there for around fix years (which ties in with the 5 year fixed mortgage rate that we have applied for) before remortgaging, looking to extend, or seeking to move to a more high-value property.

    Sorry for the essay. Basically, what plans would you be making if you were in a similar position...
    Last edited by Captain Hook; 03-01-2018 at 8:13 PM.
Page 1
    • MallyGirl
    • By MallyGirl 3rd Jan 18, 9:20 PM
    • 2,740 Posts
    • 7,746 Thanks
    MallyGirl
    • #2
    • 3rd Jan 18, 9:20 PM
    • #2
    • 3rd Jan 18, 9:20 PM
    I understand that your benefits reduce (fairly dramatically) if you retire 'early' and so what I suppose I'm after are tips, anecdotal stories and whatever else that anyone wants to contributes on what we should be doing.
    by Captain Hook
    You could build up S&S in an ISA to fund the interim between early retirement and the DB pensions to avoid the reduction, or do similar with a SIPP
    • enthusiasticsaver
    • By enthusiasticsaver 3rd Jan 18, 9:21 PM
    • 6,609 Posts
    • 13,865 Thanks
    enthusiasticsaver
    • #3
    • 3rd Jan 18, 9:21 PM
    • #3
    • 3rd Jan 18, 9:21 PM
    DH retired aged 58 last year and I have just retired and will be 58 next month. Our intention was always to retire early so we overpaid into pensions, took out AVCs and sips/stocks and shares isas and overpaid our mortgage.

    The best thing to do is work out how much you will need to live off in retirement and monitor value of pensions annually to make sure you are on target.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • crv1963
    • By crv1963 3rd Jan 18, 10:11 PM
    • 302 Posts
    • 710 Thanks
    crv1963
    • #4
    • 3rd Jan 18, 10:11 PM
    • #4
    • 3rd Jan 18, 10:11 PM
    DH retired aged 58 last year and I have just retired and will be 58 next month. Our intention was always to retire early so we overpaid into pensions, took out AVCs and sips/stocks and shares isas and overpaid our mortgage.

    The best thing to do is work out how much you will need to live off in retirement and monitor value of pensions annually to make sure you are on target.
    Originally posted by enthusiasticsaver


    A few quick thoughts-


    1) Good to be planning so young!
    2) Depending on area of medicine and career progression as a medic your OH may well likely hit the LTA, so SIPP not helpful but as a teacher it may benefit you.
    3) Spread the savings across tax efficient schemes, possibly accessible at different times. So for you SIPP, both of you ISA and LISA.
    3) Set a year maybe 10 years before SP as a target to retire, work backwards so for you SP and NPA 2057, aim to retire 2047, how to fund the 10 years before pensions start- how much pa spending (assume mortgage paid off) and then work out what you need to save.
    4) Overpay mortgage but not to the point of pushing selves into poverty, interest rates are low but they will rise in the next 39 years and you'll get a better interest rate with a lower LTV.
    5) Are you planning children? If so budget and save hard!
    6) Look at the little savings too I recently worked out that I have spent £16k over 8 years in Costa coffees! Now and then with friends good, every day at work bad!
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • NHS
    • By NHS 4th Jan 18, 1:11 AM
    • 3 Posts
    • 0 Thanks
    NHS
    • #5
    • 4th Jan 18, 1:11 AM
    • #5
    • 4th Jan 18, 1:11 AM
    Hi, I am have started working in the NHS since 7/2016 but planning to go back to Hong Kong due to family issues (and very likely to stay there for good). I currently still in the NHS pension scheme and was looking to transfer the pension money to a Qualifying Recognised Overseas Pension Scheme (QROPS) in Hong Kong when i leave in 7/2018. But just last month, all the Hong Kong pension schemes are not longer listed as QROPS on the HMRC website and therefore I would not be able to transfer the money to any of the HK pension schemes? May I ask what is the best way to maximise the amount of money I can get out of the NHS pension please. Thanks so much
    • kidmugsy
    • By kidmugsy 4th Jan 18, 1:57 AM
    • 10,859 Posts
    • 7,424 Thanks
    kidmugsy
    • #6
    • 4th Jan 18, 1:57 AM
    • #6
    • 4th Jan 18, 1:57 AM
    @NHS: you'd be wiser to start your own thread, using a title that will attract the attention of people who know about your topic.
    Free the dunston one next time too.
    • louloubelle79
    • By louloubelle79 4th Jan 18, 9:55 AM
    • 335 Posts
    • 176 Thanks
    louloubelle79
    • #7
    • 4th Jan 18, 9:55 AM
    • #7
    • 4th Jan 18, 9:55 AM
    In case this helps (wife pension) Im a nurse in the NHS and recently gone along this route with AVC in my scheme and a MPAVC with Prudential.

    https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension

    If you are a member of the NHS Pension Scheme you can also use a NHS Stakeholder Pension to top up your main NHS Pension Scheme benefits. You can do this instead of, or as well as, other top up arrangements.

    I also opened a LISA with Nutmeg
    • atush
    • By atush 4th Jan 18, 4:51 PM
    • 16,807 Posts
    • 10,489 Thanks
    atush
    • #8
    • 4th Jan 18, 4:51 PM
    • #8
    • 4th Jan 18, 4:51 PM
    Congrats on the wedding and getting onto the property ladder.

    So for your wife, the LTA may become a problem. But she may (or may not) take lenghthy career breaks for children. For her i'd look at a S&S isa (assuming you guys have a cash emergency slush fund).

    For you a Sipp or personal pension would be a good idea, esp if you want to retire early
    • TBC15
    • By TBC15 4th Jan 18, 5:40 PM
    • 493 Posts
    • 250 Thanks
    TBC15
    • #9
    • 4th Jan 18, 5:40 PM
    • #9
    • 4th Jan 18, 5:40 PM
    Sorry you lost me at saving for a wedding.
    • Captain Hook
    • By Captain Hook 4th Jan 18, 7:03 PM
    • 7 Posts
    • 5 Thanks
    Captain Hook
    Thanks for (most of) the contributions so far!

    For added context, I am a higher rate tax payer (and aim to continue to be!) although my wife currently is not since she works PT (0.6 FTE). However, she!!!8217;ll be qualified and looking to find employment as a GP from March/April.

    I believe that we are both able to make extra contributions to our DB pensions (Teacher Pension Scheme and NHS) - presumably not matched by employers. In my case, I can buy additional pension, apply for faster accrual or set up an AVC arrangement. However, since we would not be able to take these in full until we!!!8217;re 68, these might not afford us flexibility (or may even edge one or both of us into LTA zone).

    Perhaps, in the short- and medium-term, we!!!8217;re best off focusing on upping the equity in our home (investing in home improvements and making overpayments) whilst setting up ISAs (cash LISA(s) and S&S ISA(s)). We can afford to live on my salary alone, albeit frugally, so we!!!8217;ll be looking to make the best use of her income.
    • ValiantSon
    • By ValiantSon 5th Jan 18, 2:43 AM
    • 2,013 Posts
    • 1,863 Thanks
    ValiantSon
    I'd take faster accrual at 45ths. It will significantly improve your pension, and it will also help reduce your income tax. I don't know exactly what you earn, but given that you're paying 10.2% I have a rough idea. You may find that the faster accrual actually brings you down below the 40% threshold and so makes you a basic rate tax payer once again. You can combine this a buy-out (which adds an additional contribution for the duration of your career). Buy-out will allow you to retire 3 years early without any actuarial reduction. You'd need to do the sums as it may or may not be worthwhile. In my opinion, faster accrual is a no-brainer for anyone who can afford the extra payments - it certainly gives a better return than you can expect from a pension scheme in the market place.

    To give some context, let's say that your career average salary is £50,000. On your current contributions you would receive £877 of pension for every year that you worked. If you were paying faster accrual at 45ths (and had been since the new scheme began) you would receive £1,111 of pension for every year that you worked. This is in addition to your final salary pension, although yours is probably quite low, having less than 3/60ths in your old scheme. N.B. There is a limit on the maximum benefits available from flexibilities such as faster accrual, but it is still worth doing.

    Your employer will not match your increased contribution, but bear in mind that they are already paying more than you! They are paying 16.48%. You also need to understand that your pension (and your wife's) doesn't work like those in the private sector. Your pension pot is only a notional value and is not being invested. Instead, the money you pay in is being used by the government as revenue to fund current spending. You will be paid your pension, when you retire, from the income the government has at that time. This doesn't mean that your pension is at risk, rather that you have one of the best schemes available and it is underwritten by the government of the United Kingdom. Unless you think the UK is going to be wiped off the face of the earth then your pension is safer than the vast majority of people's (and if the country is wiped off the face of the earth then it doesn't really mater anyway). Your employer's contribution, therefore, has absolutely no effect whatsoever on the pension that you receive.

    I'd be surprised if you were to hit your lifetime allowance, but if you were to then a SIPP would be no use to you anyway. It may be a different matter for your wife. That isn't to say that you shouldn't consider a SIPP, but personally I'd look at a S&S ISA, perhaps with that split between a regular ISA and a LISA, given the generous 25% bonus on the LISA. Available S&S LISAs are few and far between, but compare Nutmeg, The Share Centre, AJ Bell Youinvest and Hargreaves Lansdown, who do all provide them. Obviously you can draw the money from your LISA at 60, and from your ISA whenever you want, to help fund the period between retirement and drawing your TPS.

    Be aware that under the career average scheme rules (completely unreasonably) you have to draw both of your teacher's pensions at the same time, so if you start drawing your final salary scheme at 65 you will have to start drawing your career average scheme then, and so you will have to take an actuarial reduction on this.

    I'd caution against thinking that you can add too much value to your existing home through doing work on it. There is a ceiling price for the area you live in and it is very easy to spend too much thinking - wrongly - that you will make even more on re-sale. Look at what similar properties in superb condition are selling for to give you an idea. It is far better to think of improvements that will make it the home that you want to live in, rather than having a constant eye on what you think a future buyer will pay a premium for. Do, however, ask yourselves whether what you plan to do is likely to cost more than you can expect to make back when you sell; if you still want to make the improvement because it is what you will both enjoy while you are there then you can still go ahead, but accept that it won't make you money.

    Cash LISA rates are well below inflation, so I'm not sure why you would bother with them. Skipton are offering one of the best rates, I believe, at 0.75%, but inflation is currently at 3.1% and could well continue to rise through this quarter and possibly next (or beyond - who knows?). It would make more sense to use a S&S LISA and split your allowance between the two. Bear in mind that you can both open them, so between you have a £40,000 ISA allowance (putting £8,000 in LISAs and £16,000 in ISAs).
    Last edited by ValiantSon; 05-01-2018 at 2:50 AM.
    • Captain Hook
    • By Captain Hook 5th Jan 18, 12:17 PM
    • 7 Posts
    • 5 Thanks
    Captain Hook
    I'd take faster accrual at 45ths. It will significantly improve your pension, and it will also help reduce your income tax. I don't know exactly what you earn, but given that you're paying 10.2% I have a rough idea. You may find that the faster accrual actually brings you down below the 40% threshold and so makes you a basic rate tax payer once again. You can combine this a buy-out (which adds an additional contribution for the duration of your career). Buy-out will allow you to retire 3 years early without any actuarial reduction. You'd need to do the sums as it may or may not be worthwhile. In my opinion, faster accrual is a no-brainer for anyone who can afford the extra payments - it certainly gives a better return than you can expect from a pension scheme in the market place.

    To give some context, let's say that your career average salary is £50,000. On your current contributions you would receive £877 of pension for every year that you worked. If you were paying faster accrual at 45ths (and had been since the new scheme began) you would receive £1,111 of pension for every year that you worked. This is in addition to your final salary pension, although yours is probably quite low, having less than 3/60ths in your old scheme. N.B. There is a limit on the maximum benefits available from flexibilities such as faster accrual, but it is still worth doing.

    Your employer will not match your increased contribution, but bear in mind that they are already paying more than you! They are paying 16.48%. You also need to understand that your pension (and your wife's) doesn't work like those in the private sector. Your pension pot is only a notional value and is not being invested. Instead, the money you pay in is being used by the government as revenue to fund current spending. You will be paid your pension, when you retire, from the income the government has at that time. This doesn't mean that your pension is at risk, rather that you have one of the best schemes available and it is underwritten by the government of the United Kingdom. Unless you think the UK is going to be wiped off the face of the earth then your pension is safer than the vast majority of people's (and if the country is wiped off the face of the earth then it doesn't really mater anyway). Your employer's contribution, therefore, has absolutely no effect whatsoever on the pension that you receive.
    Originally posted by ValiantSon
    That's really interesting advice and thank you for explicitly spelling out a couple of things! I ran a through calculations based on switching to a 1/45th Accrual Rate - based on my current salary being £46,497.

    Additional Cost for the Year of faster accrual: £2,408.54
    Total Pension Amount for the Year: £1,033.27 (1/45th)
    Standard Pension Amount for the Year: £815.74 (1/57th)

    So, based on current salary, I believe that means that I have to decide whether paying an extra £2,408.54 per year in employment is worth the additional £217.53 to the pension amount per year. That would indeed bring me back to the basic rate of income tax (although I'm seeking promotion to assistant headship so that may be temporary) and could also lead to savings in National Insurance contributions and Student Loan repayments.

    I'd be surprised if you were to hit your lifetime allowance, but if you were to then a SIPP would be no use to you anyway. It may be a different matter for your wife. That isn't to say that you shouldn't consider a SIPP, but personally I'd look at a S&S ISA, perhaps with that split between a regular ISA and a LISA, given the generous 25% bonus on the LISA. Available S&S LISAs are few and far between, but compare Nutmeg, The Share Centre, AJ Bell Youinvest and Hargreaves Lansdown, who do all provide them. Obviously you can draw the money from your LISA at 60, and from your ISA whenever you want, to help fund the period between retirement and drawing your TPS.

    Be aware that under the career average scheme rules (completely unreasonably) you have to draw both of your teacher's pensions at the same time, so if you start drawing your final salary scheme at 65 you will have to start drawing your career average scheme then, and so you will have to take an actuarial reduction on this.

    [snip]

    Cash LISA rates are well below inflation, so I'm not sure why you would bother with them. Skipton are offering one of the best rates, I believe, at 0.75%, but inflation is currently at 3.1% and could well continue to rise through this quarter and possibly next (or beyond - who knows?). It would make more sense to use a S&S LISA and split your allowance between the two. Bear in mind that you can both open them, so between you have a £40,000 ISA allowance (putting £8,000 in LISAs and £16,000 in ISAs).
    Keeping in mind that 2056 (our NPA) is a long way away - and it's not unlikely that this is revised upwards before we get there - I suppose it makes sense to have a relatively diverse 'portfolio' of savings/investments to fund any early retirement (without needing to draw (actuarially adjusted) pension benefits. Correct me if I'm wrong but there there seems to be two difficulties: 1) inflation eating away the value of low-yield savings, 2) government changes to pension schemes and tax laws.

    With the latter in mind, upping my pension contributions sounds like the most tax-efficient way (currently) of saving for retirement. However, in order to give us the opportunity to retire earlier should we wish to, we need to consider ways of funding 'the gap' - let's say NPA-8 if we were to aim to retire at 60. With inflation in mind, shoveling money into cash ISAs are presumably a 'Don't bother'. SIPPS could be a consideration but, if I become a deputy or headteacher or my wife move closer to FT, we may well approach LTA. That leaves us with making better use of non-cash ISA tax wrappers - namely S&S ISAs and LISAs. To matters keep matters, we could invest in funds like the Vanguard LifeSystems offerings and aim to beat inflation between now and, say, NPA-8 (i.e. 2048). In the next few years, we should also be looking to overpay our (hopeful) mortgage (2.49% fixed rate to 2023 on a 90% LTV) and building up short-term savings goals (replacing cars, holidays, home improvements, funding maternity leave etc). This means that that we'd be talking about investing £hundreds rather than £thousands per month in ISAs - nowhere near maxing out our ISA allowances.

    I'd caution against thinking that you can add too much value to your existing home through doing work on it. There is a ceiling price for the area you live in and it is very easy to spend too much thinking - wrongly - that you will make even more on re-sale. Look at what similar properties in superb condition are selling for to give you an idea. It is far better to think of improvements that will make it the home that you want to live in, rather than having a constant eye on what you think a future buyer will pay a premium for. Do, however, ask yourselves whether what you plan to do is likely to cost more than you can expect to make back when you sell; if you still want to make the improvement because it is what you will both enjoy while you are there then you can still go ahead, but accept that it won't make you money.
    Very good points. I'm definitely talking about cosmetic changes and modestly upgrading the kitchen and bathroom - possibly upgrading the conservatory to a more useful structure in time - rather than multistory extensions.
    • ValiantSon
    • By ValiantSon 5th Jan 18, 5:57 PM
    • 2,013 Posts
    • 1,863 Thanks
    ValiantSon
    That's really interesting advice and thank you for explicitly spelling out a couple of things! I ran a through calculations based on switching to a 1/45th Accrual Rate - based on my current salary being £46,497.

    Additional Cost for the Year of faster accrual: £2,408.54
    Total Pension Amount for the Year: £1,033.27 (1/45th)
    Standard Pension Amount for the Year: £815.74 (1/57th)

    So, based on current salary, I believe that means that I have to decide whether paying an extra £2,408.54 per year in employment is worth the additional £217.53 to the pension amount per year. That would indeed bring me back to the basic rate of income tax (although I'm seeking promotion to assistant headship so that may be temporary) and could also lead to savings in National Insurance contributions and Student Loan repayments.
    Originally posted by Captain Hook
    Yes, promotion may push you back into higher rate tax, but you would still continue to get tax relief on the contributions, so it would stil be a tax eficient use of the money.

    Obviously the figures you've worked out are pension accrued from one year, so the real figure at retirement will be many times greater and, as you say, it has additional benefits during your working lifetime.

    Keeping in mind that 2056 (our NPA) is a long way away - and it's not unlikely that this is revised upwards before we get there - I suppose it makes sense to have a relatively diverse 'portfolio' of savings/investments to fund any early retirement (without needing to draw (actuarially adjusted) pension benefits. Correct me if I'm wrong but there there seems to be two difficulties: 1) inflation eating away the value of low-yield savings, 2) government changes to pension schemes and tax laws.
    Originally posted by Captain Hook
    Inflation is the big problem with cash savings. You should keep an emergency fund in case of unexpected expense and loss of employment, but beyond c. 6 months of expenditure - "rainy day" - plus another lump for "large expenditure", like new cars (re-build the fund when you use it) it is not really worth keeping your wealth in cash. If you don't have a fund of money like this then I'd suggest building the "rainy day" section up first and then split new savings between S&S investments and building up a "large expenses" fund. (With cars, for example, you are always going to be better off if you can pay in cash rather than taking finance deals - oh and buy secondhand too, even 1 year old cars come with a hefty price reduction on new and you couldn't tell them apart).

    With the latter in mind, upping my pension contributions sounds like the most tax-efficient way (currently) of saving for retirement. However, in order to give us the opportunity to retire earlier should we wish to, we need to consider ways of funding 'the gap' - let's say NPA-8 if we were to aim to retire at 60. With inflation in mind, shoveling money into cash ISAs are presumably a 'Don't bother'. SIPPS could be a consideration but, if I become a deputy or headteacher or my wife move closer to FT, we may well approach LTA.
    Originally posted by Captain Hook
    Even as a deputy in a large school you are unlikely to reach your LTA. Headship may make that more of a possibility, but the size of school has an impact on salary, so you may not. However, you are right that the LTA could be reduced and then you may find that you do reach it. There have been reductions in it, so it is not entirely unlikely.

    "Funding the gap" is probably quite a good way of looking at the situation. If you can build up an investment pot that will cover that period then it will help not to draw your pension. However, it might be that you still decide to draw it early and use the investment funds to augment your pension income. This is obviously something you'd need to give consideration to closer to the time, but a Target Retirement fund (see below) may help in this way - you could choose a target retirement date near your 60th birthday and have another fund that was intended to add in additionally at 70, perhaps.

    That leaves us with making better use of non-cash ISA tax wrappers - namely S&S ISAs and LISAs. To matters keep matters, we could invest in funds like the Vanguard LifeSystems offerings and aim to beat inflation between now and, say, NPA-8 (i.e. 2048).
    Originally posted by Captain Hook
    I think the Vanguard LifeStrategy funds are a good option, particularly where investing is not something you have a great passion for and gain enjoyment from researching and trading. You might also want to have a look at their Target Retirement funds. These are similar to the LifeStrategy, but rather than being a fixed ratio of equities to bonds, they change over time, reducing equities as you approach your retirement. They may be a suitable alternative. Have a look at the Vanguard site.

    If you do go down the Vanguard route then to begin with the cheapest way of doing it is through their own platform which only charges 0.15% platform fee. Once your investment grows past a certain point, however, you would probably want to move to a fixed fee platform like iWeb to reduce your costs. It would probably be a few years before you got to that point, but it is worth keeping in mind to do an annual review of costs.

    Vanguard don't offer a LISA, so investments with them would be through a normal ISA, but if you were using both products there is nothing stopping you using a different platform for the LISA and (if you wanted) still investing in the same funds there. If it were funds you intended to invest in then your options for LISAs come down to AJ Bell Youinvest and Hargreaves Lansdown. For my money Hargreaves Lansdown work out cheaper to use for a LISA investing in specific funds like those offered by Vanguard.

    You might consider having a Target Retirement fund through Vanguard's ISA and a LifeStrategy fund through Hargeaves Lansdown's LISA. It is an option to consider. That's all I can offer - things for consideration. I hope what I say is helpful, even if it is to consider it and then dismiss it as not th best option for you.

    In the next few years, we should also be looking to overpay our (hopeful) mortgage (2.49% fixed rate to 2023 on a 90% LTV) and building up short-term savings goals (replacing cars, holidays, home improvements, funding maternity leave etc). This means that that we'd be talking about investing £hundreds rather than £thousands per month in ISAs - nowhere near maxing out our ISA allowances.
    Originally posted by Captain Hook
    Even if it were only hundreds a year to begin with, it would still be worth doing. When you have worked out what your disposable income is after paying the bills then you can create a plan to reach your savings and investment goals. It sounds, however, that what you are looking at is hundreds per month, so that is a pretty healthy amount on which, over the long term, you should see pleasing returns.

    Very good points. I'm definitely talking about cosmetic changes and modestly upgrading the kitchen and bathroom - possibly upgrading the conservatory to a more useful structure in time - rather than multistory extensions.
    Originally posted by Captain Hook
    When my partner and I bought our house we made a conscious decision that we would only spend money on things that we wanted to make the house "ours". Our attitude has been that if it does make it more attractive to a future buyer then great, but that it would probably ony be in the sense of getting them through the door and more inclined to make an offer, rather than make us a huge gain beyond simply the rise in prices.

    I hope that you manage to work out a good way forward, and best of luck with looking for promotion.
    Last edited by ValiantSon; 05-01-2018 at 6:07 PM. Reason: Typo
    • Bravepants
    • By Bravepants 5th Jan 18, 8:09 PM
    • 402 Posts
    • 436 Thanks
    Bravepants
    I always like it when the young savers/investors come along because I can post these links and it might change some lives:

    https://www.mrmoneymustache.com/

    https://theescapeartist.me/

    If only I knew then what I know now!

    Good luck!
    • chile_paul
    • By chile_paul 7th Jan 18, 3:38 PM
    • 401 Posts
    • 285 Thanks
    chile_paul
    I always like it when the young savers/investors come along because I can post these links and it might change some lives:

    https://www.mrmoneymustache.com/

    https://theescapeartist.me/

    If only I knew then what I know now!

    Good luck!
    Originally posted by Bravepants
    I will happily second the recommendation to The Escape Artist - a fascinating read (all the better as it's UK based unlike Mr Money Mustache).

    At first glance the 'style' is unusual, but it's completely change my outlook for planning.
    • atush
    • By atush 7th Jan 18, 4:10 PM
    • 16,807 Posts
    • 10,489 Thanks
    atush
    Perhaps, in the short- and medium-term, we’re best off focusing on upping the equity in our home (investing in home improvements and making overpayments)
    Uhh- No.

    As a HRTaxpayer, 100 into a pension costs you 60. How can paying off your mtg be better?

    As for buying extra years? Well all depends on when you want to retire. If you are buying pension paid at 67, and want to retire at 57, you could be paid only 50% of that pension. Not a good deal to me.

    So might be far better to pay into a DC pension of some kind (be it a PP or sipp or AVC).
    • ValiantSon
    • By ValiantSon 7th Jan 18, 5:20 PM
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    ValiantSon
    Uhh- No.

    As a HRTaxpayer, 100 into a pension costs you 60. How can paying off your mtg be better?

    As for buying extra years? Well all depends on when you want to retire. If you are buying pension paid at 67, and want to retire at 57, you could be paid only 50% of that pension. Not a good deal to me.

    So might be far better to pay into a DC pension of some kind (be it a PP or sipp or AVC).
    Originally posted by atush
    The OP is a teacher and therefore in a defined benefit scheme. Your point is not relevant given how that scheme works. My suggestion isn't about buying extra years (sadly that was ended for teachers quite some time ago), but rather paying for faster accrual which changes the denominator from 57ths to 45ths, i.e. accruing benefits at a faster rate, so pension paid per year is larger. Yes, this would be affected by actuarial reduction if the pension is taken early, but that reduction is on a larger figure to begin with, and if you read my posts you will see that we were actually talking about using investments to fund the gap between actual retirement age and age for drawing the pension (as one possibility). Furthermore, they would not be a higher rate tax payer if they were to use faster accrual, and even if they once again became one it would still benefit them.

    Anybody in TPS who can afford it would be unwise not to give serious thought to using faster accrual. TPS is a defined benefit scheme (like other public sector schemes) and therefore not even remotely the same as defined contribution pension schemes. You need to understand the rules of the specific scheme as they are very different.
    Last edited by ValiantSon; 07-01-2018 at 5:29 PM.
    • BobQ
    • By BobQ 7th Jan 18, 6:55 PM
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    BobQ
    The OP is a teacher and therefore in a defined benefit scheme. Your point is not relevant given how that scheme works. My suggestion isn't about buying extra years (sadly that was ended for teachers quite some time ago), but rather paying for faster accrual which changes the denominator from 57ths to 45ths, i.e. accruing benefits at a faster rate, so pension paid per year is larger. Yes, this would be affected by actuarial reduction if the pension is taken early, but that reduction is on a larger figure to begin with, and if you read my posts you will see that we were actually talking about using investments to fund the gap between actual retirement age and age for drawing the pension (as one possibility). Furthermore, they would not be a higher rate tax payer if they were to use faster accrual, and even if they once again became one it would still benefit them.

    Anybody in TPS who can afford it would be unwise not to give serious thought to using faster accrual. TPS is a defined benefit scheme (like other public sector schemes) and therefore not even remotely the same as defined contribution pension schemes. You need to understand the rules of the specific scheme as they are very different.
    Originally posted by ValiantSon
    Yes Faster Accural can be used to increase the pension but surely the point being made is that the pension is payable at normal retirement age and 10 years of actuarial reduction will significantly impact this (higher pension) by as much as 50%.

    The alternative is to create another means of funding the gap between early retirement and NRA, and that may well be a DC scheme. Someone paying Faster Accural of 1/45 will presumably be paying an extra 5% or so into the CARE scheme. The same money put in a SIPP would provide a more flexible solution to bridge the gap.

    Both OP and partner have some risks of breaching the LTA of course which would be a risk for someone on a GP's salary. If the OP is a high achieving teacher it also could be a concern for someone on a Headmaster's salary at a large school.
    Last edited by BobQ; 07-01-2018 at 6:58 PM.
    Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.
    • ValiantSon
    • By ValiantSon 7th Jan 18, 8:25 PM
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    ValiantSon
    Yes Faster Accural can be used to increase the pension but surely the point being made is that the pension is payable at normal retirement age and 10 years of actuarial reduction will significantly impact this (higher pension) by as much as 50%.

    The alternative is to create another means of funding the gap between early retirement and NRA, and that may well be a DC scheme. Someone paying Faster Accural of 1/45 will presumably be paying an extra 5% or so into the CARE scheme. The same money put in a SIPP would provide a more flexible solution to bridge the gap.

    Both OP and partner have some risks of breaching the LTA of course which would be a risk for someone on a GP's salary. If the OP is a high achieving teacher it also could be a concern for someone on a Headmaster's salary at a large school.
    Originally posted by BobQ
    All points I've already covered in previous posts (potential to reach LTA, funding the gap - including buy-out options).

    The faster accrual is a guaranteed return, whereas a DC scheme is not.
    • atush
    • By atush 8th Jan 18, 12:27 PM
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    atush
    Originally Posted by ValiantSon View Post
    The OP is a teacher and therefore in a defined benefit scheme. Your point is not relevant given how that scheme works.
    Rubbish.

    A teacher can have a DC scheme running alongside and should, if they want to retire earlier than scheme age.

    Enhancing their pension, then taking a 50% hit is an absurd choice. It would be a good choice if they plan working until scheme age (ie 67).
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